Half Yearly Report

RNS Number : 2976J

JPMorgan Claverhouse IT PLC

03 August 2012

 



London Stock Exchange Announcement

JPMorgan Claverhouse Investment Trust PLC

Unaudited Half Year Results
for the six months ended 30th June 2012

Chairman's Statement

The Company's net asset value total return was +2.7% over the six months to 30th June 2012. This was marginally behind the total return on our benchmark index, the FTSE All-Share, of +3.3%. The total return to shareholders was +0.1%, as the discount on the Company's shares widened a little over the period, from 7.1% to 8.1%. Shareholders will recall that, with effect from 1st March, material changes were made in the process by which the Company's portfolio is managed and that Sarah Emly was joined by William Meadon to be the two joint managers. Details of these changes were set out in my Chairman's Statement published in the 2011 Annual Report. Whilst it would have been pleasing had we been able to see a result for the six months which exceeded our benchmark index, four months is a very short time in which to measure performance and it is too early to judge the consequences of the changes in the investment process.

A full review of the Company's performance for the first six months and the outlook for the remainder of the year is provided in the Investment Managers' Report below.

Revenue and Dividends

The earnings per share for the six months to 30th June 2012 rose to 9.51p, compared to 8.48p earned in the same period in 2011. The Directors have already declared two quarterly dividends of 3.50p each for the current financial year (2011: 3.50p each). It remains the Board's aim to increase the total dividend each year; but we will carefully consider this further once we have better visibility of our likely earnings for the full financial year.

In 2011 distributions per share amounted to 18.25p and our revenue reserve at 31st December 2011 was equivalent to 16.0p per share.  In addition there has been a change in the law such that realised capital reserves may now be distributed as dividends. Although the Board has no intention of using this power, but rather is looking forward to a point in the future when the annual dividend will be covered by earnings, the presence of the power further underpins the strength of the revenue account and the Company's ability to continue to pay out increasing dividends.

Share Buy-backs and Discount

During the period under review the Company repurchased 10,000 shares into Treasury (2011: 193,000 shares). The Company did not issue any new shares over the period. Any re-issue of shares from Treasury would only be made at a premium to net asset value. As at 30th June, a total of 2,041,674 shares (3.6% of the total issued share capital) were held in Treasury. Unless it proves possible to reissue those shares, it remains the Board's intention to cancel a number of the Treasury shares such that the total held in Treasury will not exceed 5% of the issued share capital. Since the period end, the Company has not repurchased any further shares into Treasury.

At the period end the discount, with debt at par value, was 9.9% and averaged 9.8% over the six months.

Gearing

As at 30th June 2012 the Company was 7.2% geared. During the period the gearing varied between 6.7% and 15.4%. It is the Board's current intention to keep gearing within the range of 0-15%; however this level is kept under regular review in conjunction with the Investment Managers and may be increased up to a maximum in normal circumstances of 20%.

The Future

The themes outlined in both full-year and half-year statements for over two years remain unchanged. Investors are exposed to substantial uncertainties and it is quite impossible to analyse when those uncertainties might subside and allow equities to be valued closer to historic norms. Many companies outside of the banking sector are in robust health with substantial reserves of cash. For creditworthy borrowers interest rates remain at unprecedentedly low rates. However, many consumers remain over-borrowed but at least the personal sector's trends would seem to be in the positive direction. The same cannot be said of the finances of many Governments and their central banks. However, the lack of growth in many developed economies would have been far more serious had Governments not been prepared to run expansionary monetary policies.

The big uncertainty for the whole world's economy is the future of the Euro and the Eurozone. Although the United Kingdom is not a member of the 17 nation block making up the Eurozone, any breakup of the Euro would impact seriously on the UK and on many of our large companies, particularly our banks. That impact would have the potential to be even more serious in the event of an uncontrolled break-up. Yet the European political class, who were wholly responsible for the creation of the Euro but are hemmed in by domestic political considerations, continue to demonstrate denial as to the stability of the ground on which it is built. They persist in doing too little too late which results in temporary respites which seem to last for shorter and shorter durations.  Unfortunately the prospect for a resolution of the troubles of the Euro seems little closer than two years ago. Yet the risk of an uncontrolled exit of Greece leading to contagion further infecting Spain and Italy, being two economies which are too large for the present structures to rescue, is ever present. This environment is a very difficult one for investors and their managers as it is impossible to predict when and how the crisis will end. However, until it does it is difficult to see settled equity markets.

As always in troubled times I look back to history. On most historical measures equities are not expensive and have, over a long time horizon, delivered real returns.  That time horizon can be long but meanwhile at least shareholders in Claverhouse are being rewarded with a 4.5% dividend yield which is both higher than that on most bank deposits and has the prospect of growing further.

Michael Bunbury

Chairman                                                                                                                                         

3rd August 2012

Investment Managers' Report

Market Review

The UK equity market had a choppy six months to 30th June 2012, with sentiment largely driven by developments in the eurozone debt crisis and the waxing and waning of global economic growth expectations. Against this backdrop, the FTSE All-Share delivered a positive return, ending the review period with a total return of +3.3%. Smaller and mid cap stocks significantly outperformed, with the FTSE Small Cap and FTSE 250 both up 9.9%, while the FTSE 100 returned +2.2%, all on a total return basis.

The weaker relative performance of larger, globally-exposed UK-listed stocks reflected increasing worries over the outlook for global growth, with the Chinese economy slowing, the US recovery stuttering and European demand weighed down by ongoing government austerity measures. UK economic performance was not any better, with three consecutive quarterly contractions of GDP confirming that the UK economy was back in recession.

The Bank of England ('BoE') continued to provide support to the economy, announcing that it would make an additional £50 billion of asset purchases through its quantitative easing ('QE') programme in February, while the base rate was left on hold at a record low of 0.5% throughout the period.

The BoE's latest quarterly inflation report highlighted the downside risks to the UK economy.  It predicted that inflation would remain above its 2% target for longer than previously anticipated, while revising down its growth forecasts, warning that the UK was not immune to further problems in Europe. Consequently, another £50 billion of quantitative easing was announced in early July, taking the amount of Gilt purchases by the central bank up to £375 billion.

In June the BoE also unveiled a £100 billion package to provide UK banks with cheap funding in return for commitments to lend to businesses and individuals.

Portfolio Review

For the first six months of the year the total return on net assets for the Company was +2.7%, in comparison with the benchmark return of +3.3%. The underlying stock selection was positive during this volatile period, whilst the impact of our gearing was marginally negative.

As was outlined in the Chairman's statement in the 2011 Annual Report, the Company's portfolio is now managed in a more fundamentally driven way, with greater conviction now shown in individual stock positions. A number of changes to the portfolio have occurred since the new strategy was introduced on 1st March 2012. The number of direct holdings has now moved down to 62. The overall portfolio now also has a modest dividend yield premium to the FTSE All-Share benchmark yield of 4%.

In terms of the underlying performance of the equity portfolio, macro concerns dominated investors' risk appetite. Generally, those companies that delivered strong profits, increased dividends and announced resilient outlook statements outperformed the market, whilst those companies that announced profit warnings were treated very harshly. For example, the Company's underweight position in the Tesco was the biggest positive contributor to our returns over the period. Tesco announced a profit warning in early January, its first for many years, and this supposedly defensive stock underperformed the market substantially, falling by 23%. Two companies that continued to deliver strong profit growth and to provide reassurance to the market despite the tough macro-environment, were the budget airline Easyjet and the clothing retailer Next, both of which outperformed strongly, with their share prices rising by 35% and 17% respectively.

Other positive contributors included the long-held overweight positions in the life insurers Prudential and Legal & General. The daily performance of these two stocks was volatile over the period, but their growth and valuation attractions rewarded shareholders over the six months as a whole, with their share prices rising by 16% and 24% respectively. The first half of 2012 saw a number of UK companies deliver positive dividend surprises and Legal & General was a key example, with year-on-year dividend growth of 35%.

By contrast, the globally exposed mining and oil & gas sectors underperformed the market significantly as investors' fears of a slowing growth rate in China dominated sentiment towards such stocks. The Company's overweight positions in the global miner Xstrata, and the oil & gas majors BP and Royal Dutch Shell, detracted from performance. However, being underweight in the mining sector overall was beneficial. A couple of our industrial engineering stocks, Weir Group and Bodycote, also detracted, as they suffered from concerns over global economic growth forecasts. However, overall the underlying equity portfolio outperformed the rising UK equity market over the six month period.

In terms of portfolio activity, a number of new stocks have been introduced to the portfolio over the last six months. We purchased a holding in Rexam, a leading global consumer packaging company, which is part of a structural growth industry. This company is a leader in beverage can manufacturing with operations in some 25 countries, benefiting from increasing demand around the world. Rexam has achieved strong results over recent periods, announcing reassuring trading updates and its valuation is attractive, whilst also having a dividend yield of approximately 4%. Another recent purchase has been WPP, a world leader in marketing communications with operations in over 100 countries and hence benefiting from more than just the UK domestic economy. Recent results have been strong, both in terms of revenue growth and profit margins, whilst management also announced a better than expected dividend, which is encouraging.

We have added to our holdings in a number of stocks that continue to look very attractive, for example our overweight position in Imperial Tobacco has been increased, particularly in light of its attractive and sustainable dividend yield. We have also topped up our overweight position in BT, the telecom group that has been delivering a strong operational and financial performance, with an attractive dividend yield. We have also added to our holding in BAE Systems, the aerospace and defence company whose prospects we believe are currently undervalued by the equity market.

By contrast, we have exited a number of stocks that were no longer compelling investments. We sold our holding in the mining stock Anglo American, as we believed that its prospects were weakening with the slowing growth rate in China. We sold our holding in Kingfisher in early April after the shares had performed well which made its valuation unattractive, particularly in light of the risks of an earnings disappointment given the tough retail environment in both the UK and France. Overall we have reduced the number of stocks held and increased our conviction in the most attractive names.

Market outlook

Although the outlook for the economy looks challenging, equity valuations do not look stretched at current levels, particularly compared to Gilt yields. The dividend yield on the FTSE All Share, which has the potential to increase, was 4.0% at the end of June, well above the consumer price index inflation rate of 2.8% and more than twice as much as the 1.5% offered by a ten-year Gilt. The UK equity market's income attractions remain strong, with many companies having strengthened their balance sheets and built up their cash reserves over recent years. A number of UK corporates have returned to the dividend list in 2012 to date, and others have delivered stronger than expected dividend growth, an encouraging sign.  The market's forward price-to-earnings ratio of 9.4 times is comfortably below the 20-year average of 14 times, suggesting the market still offers decent value for long-term investors.

These are very challenging times: the UK economy has fallen back into recession, the Eurozone debt crisis remains unresolved and even those economies which are growing (eg USA and China) are now slowing.  However, the fact that that the UK equity market has been so resilient in the face of such economic gloom, shows how much bad news has already been built into current share prices.  Barring the very worst economic outcome, long term investors should be rewarded for being invested at this time.

William Meadon

Sarah Emly

Investment Managers   

3rd August 2012

Interim Management Report

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st December 2011.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is sufficient evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half year financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half Year Financial Reports'; and

(ii)     the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

For and on behalf of the Board.

Sir Michael Bunbury

Chairman                                                                                                                                        

3rd August 2012

For further information, please contact:

Jonathan Latter

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 4000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmclaverhouse.co.uk

Income Statement

for the six months ended 30th June 2012

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th June 2012			30th June 2011			31st December 2011
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments
held at fair value through
profit or loss	-	2,905	2,905	-	3,886	3,886	-	(27,158)	(27,158)
Net foreign currency gains/(losses)	-	3	3	-	-	-	-	(3)	(3)
Income from investments	6,178	-	6,178	5,617	-	5,617	11,129	-	11,129
Other interest receivable and
similar income	24	-	24	8	-	8	8	-	8
Gross return/(loss)	6,202	2,908	9,110	5,625	3,886	9,511	11,137	(27,161)	(16,024)
Management fee	(210)	(390)	(600)	(237)	(440)	(677)	(447)	(831)	(1,278)
Other administrative expenses	(348)	-	(348)	(290)	-	(290)	(643)	-	(643)
Net return/(loss) on ordinary
activities before finance
costs and taxation	5,644	2,518	8,162	5,098	3,446	8,544	10,047	(27,992)	(17,945)
Finance costs	(424)	(788)	(1,212)	(399)	(741)	(1,140)	(812)	(1,508)	(2,320)
Net return/(loss) on ordinary
activities before taxation	5,220	1,730	6,950	4,699	2,705	7,404	9,235	(29,500)	(20,265)
Taxation	(16)	-	(16)	(8)	-	(8)	(9)	-	(9)
Net return/(loss) on ordinary
activities after taxation	5,204	1,730	6,934	4,691	2,705	7,396	9,226	(29,500)	(20,274)
Return/(loss) per share (note 4)	9.51p	3.16p	12.67p	8.48p	4.89p	13.37p	16.73p	(53.50)p	(36.77)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up		Capital
Six months ended	share	Share	redemption	Capital	Revenue
30th June 2012	capital	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2011	14,192	149,641	6,680	64,874	13,031	248,418
Repurchase of shares into Treasury	-	-	-	(43)	-	(43)
Net return on ordinary activities	-	-	-	1,730	5,204	6,934
Dividends paid in the period	-	-	-	-	(6,156)	(6,156)
At 30th June 2012	14,192	149,641	6,680	66,561	12,079	249,153
	Called up		Capital
Six months ended	share	Share	redemption	Capital	Revenue
30th June 2011	capital	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2010	14,192	149,641	6,680	97,195	13,464	281,172
Repurchase of shares into Treasury	-	-	-	(902)	-	(902)
Net return on ordinary activities	-	-	-	2,705	4,691	7,396
Dividends paid in the period	-	-	-	-	(5,812)	(5,812)
At 30th June 2011	14,192	149,641	6,680	98,998	12,343	281,854
	Called up		Capital
Year ended	share	Share	redemption	Capital	Revenue
31st December 2011	capital	premium	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2010	14,192	149,641	6,680	97,195	13,464	281,172
Repurchase of shares into Treasury	-	-	-	(2,821)	-	(2,821)
Net (loss)/return on ordinary activities	-	-	-	(29,500)	9,226	(20,274)
Dividends paid in the year	-	-	-	-	(9,659)	(9,659)
At 31st December 2011	14,192	149,641	6,680	64,874	13,031	248,418

Balance Sheet

at 30th June 2012

	(Unaudited)	(Unaudited)	(Audited)
	30th June 2012	30th June 2011	31st December 2011
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	267,189	310,870	266,673
Investments in liquidity funds held at fair value through
profit or loss	24,571	9,636	10,546
	291,760	320,506	277,219
Current assets
Debtors	1,267	3,406	1,474
Cash and short term deposits	1,521	132	259
	2,788	3,538	1,733
Creditors: amounts falling due within one year1	(15,624)	(12,446)	(777)
Net current (liabilities)/assets	(12,836)	(8,908)	956
Total assets less current liabilities	278,924	311,598	278,175
Creditors: amounts falling due after more than one year	(29,771)	(29,744)	(29,757)
Net assets	249,153	281,854	248,418
Capital and reserves
Called up share capital	14,192	14,192	14,192
Share premium	149,641	149,641	149,641
Capital redemption reserve	6,680	6,680	6,680
Capital reserves	66,561	98,998	64,874
Revenue reserve	12,079	12,343	13,031
Shareholders' funds	249,153	281,854	248,418
Net asset value per share (note 5)	455.3p	510.8p	453.9p

¹At 30th June 2012, the Company had drawn down £15 million on its loan facility with Royal Bank of Scotland.

Cash Flow Statement

for the six months ended 30th June 2012

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2012	30th June 2011	31st December 2011
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	5,339	4,628	8,989
Net cash outflow from returns on investments
and servicing of finance	(1,149)	(1,058)	(2,287)
Tax recovered	2	-	4
Net cash (outflow)/inflow from capital
expenditure and financial investment	(11,680)	(5,983)	6,142
Dividends paid	(6,156)	(5,812)	(9,659)
Net cash inflow/(outflow) from financing	14,903	8,150	(3,134)
Increase/(decrease) in cash for the period	1,259	(75)	55
Reconciliation of net cash flow to movement in net debt
Net cash movement	1,259	(75)	55
Net loans drawn down in the period	(15,000)	(9,000)	-
Exchange movements	-	-	(3)
Other movements	(11)	(13)	(26)
Movement in net debt in the period	(13,752)	(9,088)	26
Net debt at the beginning of the period	(29,498)	(29,524)	(29,524)
Net debt at the end of the period	(43,250)	(38,612)	(29,498)
Represented by:
Cash and short term deposits	1,521	132	259
Bank loans falling due within one year	(15,000)	(9,000)	-
Debenture falling due after more than five years	(29,771)	(29,744)	(29,757)
	(43,250)	(38,612)	(29,498)

Notes to the Accounts

for the six months ended 30th June 2012

1.    Financial statements

   The information contained within the Financial Statements in this half year report has not been audited or reviewed by the Company's auditors.

   The figures and financial information for the year ended 31st December 2011 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

2.   Accounting policies

   The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009.

   All of the Company's operations are of a continuing nature.

   The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the year ended 31st December 2011.

3.   Dividends

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2012	30th June 2011	31st December 2011
	£'000	£'000	£'000
Unclaimed dividends refunded to the Company	-	(2)	(3)
2011 Fourth quarterly dividend of 7.75p (2011: 7.0p)
paid in February	4,241	3,876	3,876
First quarterly dividend of 3.5p (2011: 3.5p) paid in May	1,915	1,938	1,938
Second quarterly dividend of 3.5p paid in September	n/a	n/a	1,924
Third quarterly dividend of 3.5p paid in December	n/a	n/a	1,924
	6,156	5,812	9,659

   A second quarterly dividend of 3.5p (2011: 3.5p) per share, amounting to 1,931,000 (2011: £1,931,000), has been declared payable in respect of the year ending 31st December 2012. It will be paid on 3rd September 2012 to shareholders on the register at the close of business on 10th August 2012.

4.   Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2012	30th June 2011	31st December 2011
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	5,204	4,691	9,226
Capital return/(loss)	1,730	2,705	(29,500)
Total return/(loss)	6,934	7,396	(20,274)
Weighted average number of shares in issue	54,724,144	55,329,829	55,140,654
Revenue return per share	9.51p	8.48p	16.73p
Capital return/(loss) per share	3.16p	4.89p	(53.50)p
Total return/(loss) per share	12.67p	13.37p	(36.77)p

5. Net asset value per share

   Net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue at 30th June 2012 of 54,723,979 (30th June 2011: 55,176,483 and 31st December 2011: 54,733,979), excluding shares held in Treasury.

6.   Reconciliation of total return/(loss) on ordinary activities before finance costs and taxation to net cash inflow from operating activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2012	30th June 2011	31st December 2011
	£'000	£'000	£'000
Total return/(loss) on ordinary activities before
finance costs and taxation	8,162	8,544	(17,945)
Less capital (return)/loss before finance costs and taxation	(2,518)	(3,446)	27,992
Decrease/(increase) in net debtors and accrued income	141	(9)	(171)
Overseas withholding tax and UK income tax	(4)	(21)	(25)
Scrip dividends received as income	(52)	-	(31)
Management fee charged to capital	(390)	(440)	(831)
Net cash inflow from operating activities	5,339	4,628	8,989

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the half year has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

The half year will also shortly be available on the Company's website at www.jpmclaverhouse.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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